Abstract:
Using U.K. valuation-based property performance indices, this paper explores asymmetry between ascending and
descending phases of the real estate market cycle, a realisation of the business cycle. Statistical methods are used to
test directly for asymmetry of the sectoral and aggregate data, and to distinguish between linear and nonlinear
processes as candidates for the most appropriate models. We model the performance indices and examine the
ability of the best-fitting models to generate cyclical behaviour. Our conclusions are that property returns series by
sector are best modelled by nonlinear models that exhibit limit cyclical behaviour. However; on aggregation, not
only is the nonlinearity of the model questionable, but limit cycle behaviour is no longer evident.
